29. For the purposes of LGD estimation as referred to in Article 181(1)(a) of Regulation (EU) No …

For the purposes of LGD estimation as referred to in Article 181(1)(a) of Regulation (EU) No 575/2013 and in accordance with paragraph 131 of the EBA GL on PD and LGD estimation, institutions should calculate the realised LGD for each exposure that is covered by a master netting agreement or on-balance sheet netting as the ratio of the economic loss to the outstanding amount of the credit obligation at the moment of default calculated as E* in accordance with paragraph 27 or 28. Institutions should calculate the economic loss on the basis of this outstanding amount, and no cash flows from netting should be included as recoveries after default in the economic loss. Nevertheless, in line with paragraph 131 of the EBA GL on PD and LGD estimation, it is important to recall that the outstanding amount of the credit obligation at the moment of default calculated as E* needs to include any amount of principal, interest or fee realised so far.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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